Slovak lab group Alpha Medical has is now number two in the Czech market following its acquisition of Aeskulab. It has also just entered the Polish market. Healthcare Europa talked to Peter Lednicky managing director of Alpha, which is 100% owned by private equity group Penta Investments about the markets and his plans.

HCE: So why Aesculab?

PL: We like the Czech market. Prices are roughly 60% higher than in Slovakia. In fact, they are sometimes higher than Germany. It is a market which is going to consolidate fast. We reckon there are 400 labs and that those with sales of less than €500,000 still control €60m of sales and we expect them to lose ground fast as prices drop. The Czech insurers want a price cut of around 20%, although we think they will get a lot less than that.

HCE: And what are you buying?

PL: Well, we will be second to Futurelab. Aesculab has eight labs, plus a network of collection points and sales of €17m – about half the size of Futurelab. With consolidation we should be able to grow fast – maybe 20% or something like that.

HCE: And you have also hit Poland, buying DD Lab with sales of €4m. I hear that Poland is a really tough market – why do you want to go there?

PL: Yes, it is tough. Prices are very low because doctors have to pay for outpatient tests from the money they get for treatment. Prices are maybe a third of Czech prices, which today are similar to Germany. And, because the doctors have to pay for the tests from their fees it is a small market. In total we think no bigger than €450m, of which private laboratories are 15%.

HCE: You make it sound terribly tempting! What is the appeal?

PL: We are seeing a lot of outsourcing contracts from hospitals. One recent one in Lodz was for one hospital and was worth €3m – nearly the same as DD’s annual turnover. Our feeling is that out of the 700 hospitals with lab sales of around €380m, something like 200 will outsource over the next few years. To succeed in Poland we will have to make more acquisitions and build critical mass.

HCE: I see and you are also in Bulgaria and the Ukraine.

PL: No, we went in, opened small labs and now we’ve pulled out. We found there wasn’t really a market. We plan to concentrate on Slovakia, Poland and the Czech republic for the time being.

HCE: I know you are much the largest player in Slovakia.

PL: Yes that is right. Last year our sales there came to €12.6m and we should hit €20m there this year.

HCE: Wow! That is quite a rise. How come?

PL: Consolidation. As in the Czech republic, prices aren’t actually fixed. We sell door to door to doctors and then we negotiate prices with the three insurers so we can rapidly gain marketshare.

HCE: And you can do all this and make money?

PL: Yes. Taking into account ongoing tarriff reductions, we’re looking at 18-20% target EBITA in the Czech Rep and Slovakia and, if we do well, maybe 15% in Poland – actually the locals are all making 10-12% there which is OK.